8 Carriers, 8 Statement Formats, and $23,000 in Discrepancies Nobody Caught

An agency principal in Melbourne called me on a Tuesday with a question that turned into a three-month project. “How confident should I be that we’re being paid correctly by our carriers?”

The honest answer was: not very.

His agency represented eleven carriers. Each carrier sent monthly commission statements — some by email as PDF attachments, some as Excel files downloaded from carrier portals, some as CSV exports from commission dashboards. The formats were different. The column headers were different. The timing was different. One carrier sent statements on the 5th of the month. Another on the 15th. Two sent them “when they got around to it,” which could be anywhere from the 10th to the 25th.

His bookkeeper reconciled the statements by comparing the total commission payment against her expectation — a mental estimate based on how much business the agency had bound with that carrier in the relevant period. If the total “looked about right,” she posted the payment to QuickBooks and moved on. She did not compare individual policy-level payments against the AMS records. She did not verify commission percentages. She did not check whether every bound policy was represented on the statement.

We spent two months building a proper reconciliation process. When we applied it to the prior twelve months of carrier statements, we found $23,400 in discrepancies. Roughly $18,000 were underpayments — policies where the carrier had paid a lower commission percentage than the contract specified, or policies that were bound in the AMS but never appeared on any commission statement. The remaining $5,400 were overpayments that the carriers had not yet clawed back.

The $18,000 in underpayments had been sitting there for up to twelve months. The agency had earned it. The carriers owed it. Nobody had asked for it because nobody knew it was missing.

The Reconciliation Reality

Commission reconciliation in the insurance industry is uniquely difficult because of the structural characteristics of the data:

Multiple sources. Each carrier produces its own statement with its own format. There is no industry standard for commission statement layout, data fields, or delivery method. The agency must normalise data from eight to twelve different sources into a comparable format before any analysis can begin.

Multiple commission types. A single carrier relationship generates several commission streams: new business commissions, renewal commissions, contingent commissions (profit-sharing bonuses), supplemental commissions, and override commissions. Each type may appear on different statements, pay at different times, and be calculated differently.

Complex timing. Commissions are paid in arrears — typically 30-60 days after the policy effective date. A policy bound on January 15 might not generate a commission payment until March. By March, the agency has bound dozens more policies, and matching a specific payment to a specific bind requires precise record-keeping.

Frequent adjustments. Policies get endorsed, cancelled, reinstated, and corrected throughout their term. Each change may generate a commission adjustment — positive or negative — that appears on a future statement. A cancellation clawback in May for a policy bound in January is easy to miss if nobody is tracking the audit trail.

The Three Levels of Commission Reconciliation

Most agencies operate at Level 1. The best agencies operate at Level 3. The difference in revenue recovery is substantial.

Level 1: Total Payment Reconciliation

The bookkeeper receives the carrier statement. She looks at the total payment. She compares it to her expectation (“we wrote about $40K in premium with this carrier last month, commission should be around $6,000”). If the payment is in the right range, she posts it. If it is dramatically off, she investigates.

What it catches: Complete payment failures (carrier forgot to pay), major errors (payment off by thousands).

What it misses: Individual policy underpayments, rate errors on specific lines of business, missing policies, and small adjustments.

Estimated leakage: 3-7% of total commissions.

Level 2: Line-Item Verification

The bookkeeper or CSR matches each line item on the carrier statement to a policy in the AMS. She verifies that the policy number, insured name, and premium amount match. She flags items that do not match.

What it catches: Missing policies, premium amount errors, and payments for policies not in the AMS.

What it misses: Commission percentage errors (the payment matches a policy, but the rate is wrong), timing-based discrepancies, and systematic rate errors across an entire line of business.

Estimated leakage: 1-3% of total commissions.

Level 3: Rate and Amount Verification

Every matched line item is compared against the contracted commission rate for that carrier and line of business. The paid percentage and paid amount are verified against the contract. Any variance — even $5 — is logged and investigated if it exceeds the threshold.

What it catches: Everything Level 2 catches, plus rate errors, systematic underpayments by line of business, and contract compliance verification.

Estimated leakage: Under 1% of total commissions (the irreducible minimum of timing differences and legitimate adjustments).

The Contingent Commission Dimension

Contingent commissions — profit-sharing bonuses paid quarterly or annually based on the agency’s book performance with a carrier — represent a separate reconciliation challenge. These commissions can be 2-5% of eligible premium, representing $10,000-$50,000 or more annually for a mid-size agency.

Contingent commission calculations are complex: they typically consider loss ratio, premium volume, premium growth, and retention rate. The carrier calculates these metrics using their data. The agency rarely has the ability to independently verify the calculation because they do not have access to the carrier’s loss data at the level of granularity needed.

However, the agency can and should track the inputs: premium volume (verifiable from the AMS), premium growth (verifiable from year-over-year AMS data), and retention rate (verifiable from renewal data). If the carrier’s reported premium volume does not match the agency’s AMS records, the contingent commission calculation is built on incorrect inputs.

I have seen agencies discover five-figure contingent commission discrepancies simply by comparing the carrier’s reported premium volume against the agency’s own records. The carrier’s systems had not captured several mid-year policy changes, resulting in a lower premium base and a lower contingent commission payment.

The Statement Format Standardisation Problem

The most time-consuming part of manual reconciliation is not the comparison — it is the data normalisation. Carrier A sends a PDF with columns in one order. Carrier B sends an Excel file with different column headers. Carrier C sends a CSV with abbreviated field names that do not match anything in the AMS.

Before any reconciliation can occur, someone must translate each carrier’s format into a common structure: policy number, insured name, effective date, premium, commission percentage, commission amount. This translation is tedious, error-prone, and repeated every month for every carrier.

Standardising the input — even if manually, into a consistent spreadsheet format — reduces the per-statement processing time dramatically. Once the data is in a common format, the comparison against AMS records becomes formulaic rather than interpretive.

The Revenue Assurance Mindset

Commission reconciliation is fundamentally a revenue assurance function. The agency has earned the commission. The carrier has a contractual obligation to pay it. The reconciliation process exists to verify that the obligation has been met — and to identify and recover instances where it has not.

This is not adversarial. It is arithmetic. Carriers have complex systems processing millions of transactions. Errors are inevitable. The carriers that discover overpayments will claw them back promptly. The agencies that discover underpayments should pursue them with equal diligence.

The agencies that build systematic reconciliation processes do not just recover underpayments. They create a culture of financial precision that extends to producer commission calculations, client billing, and financial reporting. When every dollar flowing into the agency is verified at the source, the downstream accuracy of everything that follows — producer payouts, financial statements, tax reporting — improves correspondingly.

Your carriers owe you money. Some of them owe you money right now, on commissions they should have paid but did not, on rates they should have applied but did not, and on policies they should have processed but did not. The only way to know is to look — systematically, at the policy level, every month. The money is there. It has always been there. You just have to reconcile to find it.